Friday, July 18, 2008

Senator Dick Durbin's Solution to the Oil Crisis

Thank you for contacting me about increasing domestic energy production. I appreciate hearing from you.

Record high fuel prices have sparked increased interest in opening additional areas in the outer continental shelf (OCS) and the Arctic National Wildlife Refuge (ANWR) to oil and gas leasing. I share your interest in addressing our nation's energy needs and support safe and environmentally responsible oil production. But I also recognize that an energy policy based primarily on drilling will not meet the needs of American consumers.

Large areas of our onshore and offshore oil and gas reserves already have been made available for leasing and development, yet prices remain at unprecedented levels. The Minerals Management Service estimates that 79 percent of recoverable offshore oil and 82 percent of offshore natural gas is already open to drilling. Onshore, the numbers tell a similar story. Roughly 72 percent of oil and 84 percent of natural gas resources are leased or open for exploration pending the completion of land-use planning or environmental reviews. The oil companies continue to demand the right to drill on federal lands and on our coastline, but they are failing to produce on lands currently under lease.

According to the Energy Department's Energy Information Administration providing increased OCS access in the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic oil and gas prices before 2030. An analysis released by the Energy Department in May 2008 projected that at peak production oil from ANWR could reduce the price per barrel of oil by $0.40 to $1.44 on the global market, an amount equal to one percent or less of the price of crude oil. This would amount to a savings of just a few pennies per gallon for consumers. We cannot drill our way out of our energy troubles

It would be at least 20 years after opening ANWR before oil production reaches its peak of 750,000 barrels per day. In comparison, the fuel economy standards passed by Congress in last year's energy bill are expected to save between 2 million and 2.5 million barrels of oil per day by 2025.

Others in the oil industry blame short supplies on federal refinery laws. However, the industry itself reduced its refinery operations and capacity over the past decade, closing many competitive, independent refineries. Meanwhile, domestic utilization of operable refinery capacity is lower than it has been in years, averaging just over 85 percent during the first four months of 2008.

I am deeply concerned about the effects of high fuel prices on Illinois residents. Increases in energy costs affect consumers in countless ways. High prices at the pump drive up food prices and further deplete the savings of consumers who in many cases are struggling just to pay for the necessities of life.

Several factors continue to put significant pressure on gasoline prices. Since the price of oil is quoted in dollars, a weak U.S. dollar has triggered a rise in world crude oil prices. Increased world demand for crude oil and lasting concerns about the threat of supply disruptions have contributed to an increasingly volatile market.

Many experts have suggested that today's high fuel prices cannot be fully explained by the market interplay between supply and demand. Excessive speculation and manipulation in energy commodity markets may be a significant factor in higher prices, and the Commodity Futures Trading Commission (CFTC) does not have the resources or the authority to fully address this risk.

For this reason, I introduced the Increasing Transparency and Accountability in Oil Prices Act of 2008 (S. 3130). My legislation would promote greater transparency in the trading of energy commodities and provide the CFTC with increased resources so that it can better monitor energy markets and prevent traders from engaging in price manipulation and excessive speculation.

I will keep your thoughts in mind as I continue to work for legislation to set our country on a path toward a more stable energy supply and a more secure energy future.